Households receive their income in the circular flow diagram by
A) selling the use of their property.
B) selling the goods they produce at home.
C) obtaining dividends and interest payments.
D) selling resources they own to business firms.

Question

Quizplus · Accepted Answer

Households receive their income by selling the resources they own, such as labor or capital, to business firms in exchange for wages and profits. This is represented by the arrow going from "factors of production" to "firms" in the circular flow diagram. A) is incorrect because selling the use of their property would fall under selling resources they own (such as land) to business firms. B) is incorrect because selling goods produced at home would fall under being a business owner, not a household. C) is incorrect because obtaining dividends and interest payments would come from owning stocks, bonds, or other financial assets, which would also fall under selling resources they own to business firms.

Households Receive Their Income in the Circular Flow Diagram by